2015 (7) TMI 841 - AT - Income Tax

Unexplained cash credits in assessee s bank account - addition u/s 68 of the Act, on the ground that the assessee was not able to furnish the explanation regarding the nature and source of cash and other deposits and held the amount as unexplained - CIT(A) deleted the addition - Held that - CIT(A) after going through the written submissions of the assessee, without seeking a remand report from AO, comes to the conclusion that modus-operandi of the assessee was that first, cash was deposited in the proprietary concern account of assessee in Punjab National Bank ; and in the second stage, it was transferred by the assessee through banking channel to two companies wherein he is the Director ; and in the third stage, the other two Directors, namely, Shri Mukesh Gauam and Shri Chandra Prakash Bhardwaj used to issue cheques to the entry seekers, thus the cash deposited in bank is back in the hands of the depositors. However, we find this modus operandi does not come out of the written submission or emerge from the records before us. We are unable to understand how the CIT (A) accepted the modus simply accepting the version of the assessee without at least calling for the bank statement of the two companies wherein he is the Director to verify whether the contention of the assessee saying that he is only an accommodation entry provider is correct or not; or by calling for remand report and find out to whom accommodation entries were given etc. In the said scenario, we set aside the order of the CIT (A) and remand the matter back to the file of the AO for de novo assessment. - Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Reduction of addition on account of unexplained cash credits.
2. Direction to compute income as commission income without substantiating evidence.

Issue-wise Detailed Analysis:

1. Reduction of Addition on Account of Unexplained Cash Credits:
The revenue's primary contention was that the Commissioner of Income-tax (Appeals) [CIT(A)] erred in reducing the addition of Rs. 4,29,98,561 to Rs. 4,39,985, which was initially made by the Assessing Officer (AO) on account of unexplained cash credits in the assessee's bank account. The AO had determined that the total amount of Rs. 4,29,98,561 deposited in the assessee's bank account was unexplained and thus deemed it as the assessee's income for the relevant assessment year under section 68 of the Income-tax Act, 1961. The AO observed that the assessee did not provide any satisfactory explanation or evidence regarding the source of these deposits despite multiple opportunities and notices issued. The CIT(A), however, accepted the assessee's submission that he was involved in providing accommodation entries for a commission and reduced the addition significantly.

2. Direction to Compute Income as Commission Income Without Substantiating Evidence:
The CIT(A) directed the AO to compute the income of the assessee as commission income at a rate of Rs. 1 per Rs. 100, based on the assessee's admission that he was providing accommodation entries for a commission. The CIT(A) estimated the assessee's income from the commission business at Rs. 4,39,985. The revenue argued that this direction was erroneous as it lacked substantiating evidence against the AO's finding that the amount under dispute was unexplained income. The CIT(A) did not seek a remand report from the AO or verify the assessee's claims by examining the bank statements of the companies involved or calling for additional evidence.

Tribunal's Findings:
The Tribunal found that the CIT(A) had accepted the assessee's version without adequate verification or investigation. The AO had conducted the assessment under section 144 due to the non-cooperative conduct of the assessee, who failed to provide necessary details and explanations. The Tribunal noted that the CIT(A) did not seek a remand report or verify the bank statements of the companies to which the funds were transferred. The Tribunal emphasized that the CIT(A) should have verified the assessee's claims by calling for additional evidence and seeking a remand report from the AO.

Conclusion:
The Tribunal set aside the order of the CIT(A) and remanded the matter back to the AO for a de novo assessment. The AO was instructed to conduct a thorough investigation, including verifying the bank statements and the modus operandi claimed by the assessee. The Tribunal emphasized that the AO should pass the assessment order in accordance with the law, without being influenced by the previous observations. The appeal of the revenue was allowed for statistical purposes.

Order Pronouncement:
The order was pronounced in open court on July 22, 2015.